Nigeria has already eliminated an unsustainable subsidy. The real test is whether the fiscal space it created translates into lower transport costs, stronger industry and better public services. That framework already exists. The National Economic Council where the federal government and all 36 governors sit is the natural forum to negotiate and publish binding investment and transparency commitments tied to subsidy financing, without which Nigeria risks winning the battle against a bad subsidy regime while losing the larger war for sustainable development.
As the 2027 political season gathers pace, fuel subsidy removal has resurfaced as a live political fault line. Atiku Abubakar has proposed a “targeted” subsidy framework to cushion citizens from the continuing cost-of-living crisis. President Tinubu, meanwhile, continues to defend the 2023 decision, arguing that it expanded resources available to the federating units, helped states meet salary obligations, funded NELFUND and social programmes, and enabled major infrastructure projects. Both miss the more important question: not whether subsidy removal was right, but whether the fiscal space it created is being converted into the assets, especially transportation, that would actually lower the cost of living of Nigerians. A subsidy regime consuming trillions of naira annually, and encouraging arbitrage and smuggling in the process, was fiscally unsustainable , which was a case I made at length in an earlier op-ed, “Can Nigeria’s 2023 Reforms Still Be Turned into a Development Dividend?”
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Three years later, that diagnosis still holds. Yet Nigeria never established a binding federating framework for channelling a defined share of the reform’s fiscal space into productivity-enhancing investment. The Federal Ministry of Finance’s “By the Numbers” provides a useful clarification. It estimates that ₦15.8 trillion in subsidy savings accrued to the federation between June 2023 and December 2025, with ₦5.43 trillion distributed to the Federal Government, ₦6.52 trillion to states and ₦3.88 trillion to local governments. The Ministry further frames the removal as reduced borrowing, rather than one large federal cash pool. That clarification strengthens, rather than weakens, the case for a single federation-wide fiscal compact: one that commits states and local governments to channelling a defined share of savings into productivity-enhancing investment, and extends “By the Numbers”-style transparency to how they spend it. Higher allocations should not simply provide genuine relief to pay salaries, prevent fiscal crises, protect livelihoods, and finance recurrent expenditure. They should also create assets that reduce the cost of production, particularly transportation and living for Nigerians.
Transportation is where this matters most. Nigeria’s inflation problem is inseparable from the cost of moving people, food and goods. Recent reports of highways of horror along Benin-Asaba, Lagos-Benin, and Benin-Agbor, among other corridors across the country, expose not just a mobility problem, but an infrastructure, productivity, and consumption crisis. When poor transport infrastructure drives prolonged journeys, fuel wastage and higher logistics costs, the burden ultimately falls on consumers. For a country that removed fuel subsidies to create fiscal space and reduce economic distortions, allowing these infrastructure failures to persist represents a serious policy contradiction.
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The Federal Ministry of Finance reports roughly ₦6.47 trillion spent on strategic infrastructure, including the Lagos–Calabar Coastal Highway and the Sokoto–Badagry Superhighway, a welcome development but insufficient on their own. Nigeria needs an integrated architecture where roads, rail, waterways, CNG and electric mass transit complement each other, with long-haul freight and passengers shifting toward rail, while highways serve as feeders. Otherwise, the country will keep spending heavily to maintain an inherently inefficient system.
There is a lesson here for 2027 as well. Reviving a broad subsidy, or a loosely defined “targeted” one, risks reopening the distortions the 2023 reform closed. “Targeting” sounds like the responsible middle ground, but it presupposes machinery Nigeria has struggled to build: a reliable registry of who is poor, a way to verify that registry against subsidised purchases, and a bureaucracy insulated from the diversion that plagued the old regime.
The same logic applies to CNG. The National Affordable CNG Transit Programme the Nigeria Governors’ Forum is now backing could translate lower operating costs into lower fares. Nonetheless, CNG was already part of the original post-subsidy response: a ₦100 billion programme to acquire 3,000 20-seater CNG by March 2024 was announced in July 2023, followed by the Presidential Compressed Natural Gas Initiative (PCNGI) targeting 11,500 vehicles and 55,000 conversion kits. The idea was right from the start; delivery and scale are what lagged. That an “affordable CNG transit programme” is being relaunched three years on is a legitimate question about execution and cohesion, not concept – an evidence that Nigeria has produced programmes faster than it has built systems.
This is also where accountability politics becomes unavoidable. Tinubu has called on states to account for their share of savings; the Nigeria Governors’ Forum insists non-accountability “is not on” them, even while backing the new CNG initiative. That disagreement itself supports the argument for the compact of accountability and investment obligations that do not depend on political goodwill.
There is a lesson here for 2027 as well. Reviving a broad subsidy, or a loosely defined “targeted” one, risks reopening the distortions the 2023 reform closed. “Targeting” sounds like the responsible middle ground, but it presupposes machinery Nigeria has struggled to build: a reliable registry of who is poor, a way to verify that registry against subsidised purchases, and a bureaucracy insulated from the diversion that plagued the old regime. Where a large share of transactions run through cash and informal channels, means-testing at the pump is closer to a slogan than a policy. The better question is not whether subsidy should return, but how Nigeria makes its removal’s benefits visible in daily life.
The Tinubu administration deserves credit for taking a decision previous governments postponed and for beginning, however imperfectly, to account for post-reform resources. But acknowledging progress should not mean abandoning scrutiny. Nigerians were told the pain of removal was the pain of a woman in labour, sharp but temporary. Three years on, that relief has not arrived for most households, and the political class has not visibly shared the sacrifice it demanded.
Concretely, the federating units should ring-fence a defined share of financing emanating from subsidy reform specifically for transportation. This should be deployed to rehabilitating existing federal highways, scaling CNG and electric mass transit from pilot conversions into an actual public transit system, and building our rail. Beyond financing formulas, Nigeria needs a genuine transportation roadmap co-formulated by the federal government, the states and the private sector, built around public mass transit rather than scattered investments. A case I have made at greater length in rethinking Nigeria’s and Africa’s transportation future while asking if Nigeria’s 2023 reforms can still be turned into a development dividend? Done well, this would durably lower the transport-driven inflation now hurting households more than subsidy removal itself.
The Tinubu administration deserves credit for taking a decision previous governments postponed and for beginning, however imperfectly, to account for post-reform resources. But acknowledging progress should not mean abandoning scrutiny. Nigerians were told the pain of removal was the pain of a woman in labour, sharp but temporary. Three years on, that relief has not arrived for most households, and the political class has not visibly shared the sacrifice it demanded. Worse, several states aggressively widened their tax nets in the post-subsidy period, placing additional pressure on households already absorbing the twin shocks of subsidy removal and naira depreciation, while offering limited evidence that the additional revenue is being reinvested in the roads, public transit and services needed to lower their cost of living.
Nigeria has already eliminated an unsustainable subsidy. The real test is whether the fiscal space it created translates into lower transport costs, stronger industry and better public services. That framework already exists. The National Economic Council where the federal government and all 36 governors sit is the natural forum to negotiate and publish binding investment and transparency commitments tied to subsidy financing, without which Nigeria risks winning the battle against a bad subsidy regime while losing the larger war for sustainable development. So, the question for 2027 should therefore not be whether subsidy should return, but whether Nigeria finally turns the pain of reform into assets that make living cheaper, production more competitive and the economy more productive.
David Okelue Ugwunta, a public policy and economic planning specialist, is a senior adviser (Economic) with Thoughts and Mace Advisory.
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